By ZIMCODD| Mindful of the Covid-19 public health and economic crisis, the Zimbabwe Coalition on Debt and Development (ZIMCODD) anticipated robust fiscal and monetary measures from the Mid-Term Budget Review announced by the Minister of Finance and Economic Development, Professor Mthuli Ncube on the 16th of July 2020. In particular, ZIMCODD anticipated a stimulus package to parachute much needed liquidity to safeguard the economic viability of Small to Medium Enterprises and the Informal Sector. ZIMCODD also hoped for meaningful steps towards the structural transformation of our economy and the realignment of spending priorities to increase support towards our overwhelmed public health and social sectors. Furthermore, ZIMCODD anticipated indications of urgent government led actions to mobilise capital and resolve Zimbabwe’s debt distress. The Mid-Term Budget Review failed to meet these expectations, thus bringing little hope to the poor, vulnerable and marginalised in Zimbabwe.
Medium-term budgetary frameworks are fiscal arrangements that allow the government to extend the horizon for fiscal policy making beyond the annual budgetary calendar. The main aim of mid – term reviews is to maintain fiscal discipline by monitoring and evaluating the impact of existing budgetary commitments and the projected costs of new policy measures.
Admittedly, the Zimbabwean government has limited fiscal space given the absence of popular support and consensus around a shared economic vision, and the persistence of weak macroeconomic fundamentals like the hyperinflationary environment, currency instability, exchange rate and liquidity issues, mass unemployment, debt distress and deindustrialisation. Addressing weak economic fundamentals and committing towards a just and equitable economy are critical to enhance long-term economic recovery from the devastating impacts of the Covid-19 crisis. Anticipated reductions in trade and investment, weaker domestic and cross border trade activities, reduced demand for raw materials and unprocessed goods, and increased pressures on public resources require bolder and more equitable responses from governments. In his address, Minister Ncube noted that Zimbabwe’s economy is projected to shrink by 4.5 percent in 2020 from the 3 percent earlier projected due to the negative impact of the Covid-19.
The ZWL$18.2 economic stimulus package provided for earlier before the Mid – Term Budgetary Review for businesses plus the ZWL$800 million budget surplus announced, are inadequate to resource urgent social protection, food security and health needs arising from the compounded health, economic and security challenges brought about by the Covid crisis. The prevailing hyperinflationary environment estimated at 785.5% as of May 2020 further diminishes the value of resources available for Zimbabwe to contend with the growing crisis.
Improved wage and salary conditions for civil servants particularly frontline workers in the fight against COVID-19 is an unaddressed priority in the mid-term budget review given the prevailing context in which the majority of Zimbabweans are amongst the working poor and most salaried employees live below the poverty datum line. The poverty datum line is currently estimated at ZWL$8484 (Zimbabwe National Statistics Agency) as of June 2020. Relatedly, the Mid Term Budget Review ignored the plight of informal workers who are hit the hardest by the prevailing economic crisis and global Corona Virus pandemic. The informal sector provides livelihoods to 76 percent of the total employed population in Zimbabwe or 2,2 million people. Most informal work has been disrupted by the advent of the Covid-19 pandemic and the ensuing lockdown regulations which have incapacitated the ability of workers to operate and sustain their livelihoods. Furthermore, Vending stalls, tuck-shops, factory stalls, stock, equipment and other property used in the informal economy were demolished by the government under SI 77 of 2020. Informal traders are yet to be reinstated to the new 8500 workspaces that the government promised to replace the demolished ones.
Minister Ncube notes that 760 000 vulnerable food insecure households had been supported by grain across the eight rural provinces per month during the first quarter to the tune of ZWL$414.2million under the Food Deficient Mitigation Strategy but his Mid Term Budgetary Review Statement fails to address the gnawing phenomenon of rising urban poverty. The Harmonised Social Cash Transfers to food insecure and labour constrained households benefiting 63000 households in the 23 poorest districts is vastly inadequate to ameliorate the growing levels of poverty in Zimbabwe. Strengthened social safety protection mechanisms to increase the resilience of most Zimbabwean households as well as the extension of available social security mechanisms to protect the working poor are to ensure that every Zimbabwean, particularly, the underprivileged and those most affected by the declining economic outlook (particularly employees whose living wages have been eroded by hyperinflationary pressures and the informal sector) climate change in the form of drought and disasters like cyclone Idai, pandemics like Covid-19, typhoid and Cholera are assisted.
The Mid Term Budget Review further erodes incomes from the transacting public by introducing a 2% intermediated tax on foreign currency transactions which becomes effective on the 1st of August 2020. This tax will reduce the purchasing power of civil servants who were recently awarded a monthly allowance of US75 Covid-19 allowance. The tax-free threshold for foreign currency transactions from ZWL$100 to ZWL$300 will affect the poorest in Zimbabwe. The government must reduce the tax burden on employees and desist from providing tax holidays to foreign multinationals who are making exponential profits from investing in Zimbabwe. Tax from conglomerates can be injected into the economy to promote development through job creation, infrastructural development and provision of social protection mechanisms. All income below the poverty datum line must not be taxed to prevent employees from falling deeper into abject poverty.
The feminisation of poverty presents a conundrum that the government has to grapple with. Women who constitute more than 52% of Zimbabwe’s population, are the most affected by Corona Virus as they are caregivers to minors, the sick and elderly. Most women dominate the informal sector and have increasingly become food insecure in the aftermath of Covid-19. Women and youths are usually the most marginalised in almost every society. The government must capacitate the women and youths to develop income generating to promote sustainable livelihoods. Distribution of food and humanitarian cash packs must be conducted to mitigate hunger, desperation and resort to crime for the most affected households and families. The distribution must be done in a transparent and non-partisan manner.